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Measure 86: Weighing Financial Risks Against Funding Oregon Students

In many ways, Measure 86 is about the future. It would allow the state to borrow money for a scholarship fund for Oregon students pursuing college or career training. Opponents say it carries financial risks into the future. Proponents say it’s about the future of college students.

Portland State University

Alan Sylvestre/OPB

Tony Funchess is a senior at Portland State University hoping his business degree will enable big plans he has for after graduation.

“I want to create community business resource centers,” he said. “I want to create environments and spaces where folks can come and receive services - clerical, administrative. These are some foundational, skill-building, jobs.”

But it’s impossible to look at Funchess’ life after graduation without considering the cost of the six years he’s spent taking classes at PSU and Portland Community College.

“Right now, I am about $36,000 in debt, with educational debt.”

And Funchess is one of the fortunate ones. He’s got a scholarship covering tuition for his senior year.

Ballot Measure 86 aims to rein in student loan debt, according to the measure’s lead advocate, Democratic state treasurer Ted Wheeler, who explained how Measure 86 would work on OPB’s Think Out Loud.

The measure requires a change to the state constitution because of the endowment’s primary funding source. It would allow the state to borrow money, at today’s favorable interest rates, and invest that money in the stock market.

Klamath Falls-area Republican state Senator Doug Whitsett opposed Wheeler on Think Out Loud. He argued endowments are fine - but not if they’re funded with money the state has to pay back. Whitsett takes issue with the Treasurer’s comparisons to private college endowments.

“Ted’s alma maters - Stanford, Columbia, and Harvard - all have endowments,” Whitsett said. “But they do not create the endowments with borrowed money.”

Measure 86 would allow an endowment with borrowed money, but it’d be up to legislators like Whitsett to do the borrowing.

When Wheeler first proposed a state endowment for financial aid, about 20 months ago, he wanted it big: $500 million big. Now, he’s thinking $100 million - for two reasons.

“Number one - interest rates have gone up. I’ve always been clear - if interest rates go up to 4.5 or 5 percent, bonding is off the table,” Wheeler said.

That’s because high interest rates would eat up too much of the stock market earnings to effectively build the endowment. Wheeler advocates finding other funding sources - private donations, for instance. But there’s another reason Wheeler scaled back.

“The second reality is that the Legislature is very risk-averse right now,” he said. “There have been some notable blow-ups of Oregon policy in the last two years, that has made our Legislature gun-shy.”

So, if the measure were to pass - and even if Wheeler and other supporters started small - turning new bonding authority into actual dollars could mean waiting, years into the future.

Back in 2002, voters changed the constitution to allow bonding to improve the seismic condition of schools. So, what happened?

“Nothing happened in 2002, or 2003, 2005,” said earthquake safety advocate Ted Wolf, who said it took years of rulemaking, legislating and lobbying to fund the retrofits.

“The legislature, finally, seven years later, in 2009, authorized the first borrowing for that purpose, of seismic safety in schools, and actually sold some bonds and financed - intended to finance - $15 million of projects with that first round,” Wolf said.

That lag time is another reason that Measure 86 is really about the future, according to Treasurer Wheeler.

“This is an effective solution, but it’s a long-term solution,” Wheeler said. “But I think we have a vested interest in making sure our kids and our grandkids are economically viable and can compete, so that they don’t have to go through a lot of the same struggles that Oregonians are going through right now, today.”

Opponent Whitsett says the future orientation of the measure cuts the other way, too - when it comes to the risk, and who could be on the hook.

“When we borrow money like this for a purpose such as educating students, we’re simply shifting the burden from the family and the student and their families to the Oregon taxpayers, and more specifically, to the next generation of Oregon taxpayers,” he said.

Wheeler argues the endowment would grow over time. He says the state’s retirement fund portfolio has grown almost 11 percent a year, on average, over the last few decades, including years when it took a beating in recent recessions.

Back at PSU, senior Tony Funchess says he’s one of the few students who’s aware of Measure 86. And he realizes the timing and limited funds of the measure may provide little help to him, or his classmates.

Funchess: “86 is not enough. 86 is not enough. But what it is, is it’s encouraging to see that folks are thinking about this great challenge, and trying to identify additional, different ways to meet this challenge. We haven’t really had this conversation before.”

Wheeler says he doesn’t know how many students would benefit from a Measure 86 endowment fund. That would depend on what lawmakers would be willing to borrow, and how officials divvy it up — if it passes.